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BNP Paribas downgraded Indian stocks to neutral from overweight, saying policy reforms may be delayed until after general elections in 2014 due to a deadlocked government and high inflation.

However, the brokerage said the downgrade was only to neutral because India has a strong positive correlation with commodity prices, so it is likely to be at least an in-line performer during 'risk-on' periods.

BNP said in a note on Tuesday 38 percent of Indian stock market earnings are derived from global cyclical sectors.